Canadian COMPETITION LAW

In a very interesting refusal to supply case currently before the federal Competition Tribunal the Used Car Dealers Association of Ontario (“UCDA”) is attempting to obtain leave from the Tribunal for the re-supply by the Insurance Bureau of Canada (“IBC”) of data used in one of the UCDA’s products (Auto Check – which provides used vehicle accident history searches to its dealer members).

According to the UCDA, the data previously supplied by the IBC is a “critical input” for its Auto Check product and is, as such, seeking a Tribunal order under the refusal to deal and price maintenance provisions of the Competition Act for the IBC to recommence supply (both sections 75 and 76 of the Act, refusal to deal and price maintenance, allow the Tribunal to order suppliers to re-supply where the elements of those sections are met).

Not surprisingly, the IBC argues that the UCDA’s leave application should be dismissed, including based on the 1997 Warner case.  In Warner, which involved a rather rare application by the Competition Bureau under section 75 (refusal to deal) in the context of Warner Music’s refusal to grant music copyright licenses to its competitor BMG Canada for its competing Canadian mail order record club business, the Tribunal accepted Warner’s arguments that section 75 did not apply in a refusal to license context.

In particular, the Tribunal held that licenses are not a “product” for the purposes of section 75, that there cannot be an “ample supply” of legal rights over intellectual property which are “exclusive by their very nature” and that there cannot be “usual trade terms” for licenses when they may be withheld – all requirements to establish refusal to deal under the Act.

While the Tribunal went on in Warner to concede that a copyright license could be a “product” for under other sections of the Act, it relied largely on principles of statutory interpretation to decide that section 75 was not intended to encompass refusals to license intellectual property.

Since it was decided, Warner has generally been viewed as an obstacle to parties seeking to invoke section 75 in a refusal to license context.  To decide otherwise has been seen by some as potentially leading to a “compulsory licensing regime” under the Competition Act.  Others, however, have criticized Warner as having been wrongly decided.

Now, the UCDA is attempting to go around Warner, arguing, among other things, that the provision of data (at least in this case) is a “service” not a license (therefore the parties are in a supplier-customer not licensor-licensee relationship), that the characterization of the relationship (i.e., supply of service or licensing) is best made at the hearing not leave stage, developments in the Bureau’s position on the application of the Competition Act to Intellectual property (in its 2000 Intellectual Property Enforcement Guidelines) and case law decided since Warner, which the UCDA argues supports the Bureau’s position in its IPEGs.

The IBC, in turn, argues that the supply of data was in fact a licence (and did not, for example, involve the transfer of title to the data), UCDA cannot meet the “usual trade terms” (as there cannot be usual trade terms when a licence may be withheld) and that the data “product” cannot be in ample supply when its owners have the legal right to withhold it.

While the Tribunal has not yet ruled in this leave application, if the UCDA is indeed able to find a way around Warner, it will potentially open the door for other refusal to deal cases involving refusals to license intellectual property and be a significant addition as well to the small pool of Canadian competition/intellectual property law cases.

For the Notice of Application, Response and Reply in this case see:

Notice of Application

Response

Reply

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